Wednesday, October 18, 2006

In Defense of Hayek, by Tim Duy: I feel a need to at least quickly defend Hayek against
Jeffery Sachs attacks. Sachs leaves the impression that Hayek is a right
wing ideologue who argues against any state provision of social services. From
the Road to Serfdom:

There is no reason why in a society which has reached the general level of
wealth which ours has attained the first kind of security should not be
guaranteed to all without endangering general freedom…there can be no doubt that
some minimum of food, shelter, and clothing, sufficient to preserve health and
the capacity to work, can be assured to everybody…Nor is there any reason why
the state should not assist the individuals in providing for those common
hazards of life against which, because of their uncertainty, few individuals can
make adequate provision. Where, as in the case of sickness and accident, neither
the desire to avoid such calamities nor the efforts to overcome their
consequences are as a rule weakened by the provision of the assistance – where,
in short, we deal with genuinely insurable risks – the case for the state’s
helping to organize a comprehensive system of social insurance is very
strong….To the same category belongs also the increase of security through the
state’s rendering assistance to the victims of such “acts of God” as earthquakes
and floods. Whenever communal action can mitigate disasters against which the
individual can neither attempt to guard himself or make provision for the
consequences, such communal action should undoubtedly be taken….There is,
finally, the supremely important problem of combating general fluctuations of
economic activity and the recurrent waves of large-scale unemployment which
accompany them…

The type of planning that Hayek was vociferously opposed to is that meant to
offset not insurable risk, but the fundamental shifts that accompany structural
change:

The planning for security which has such an insidious effect on liberty is
that for security of a different kind. It is planning designed to protect
individuals or groups against diminutions of their income, which although in no
way deserved yet in competitive society occur daily, against losses imposing
severe hardships having no moral justification yet inseparable from the
competitive system.

In other words, it is appropriate for society to guarantee a proscribed level
of health care accessibility, but not to guarantee you against loss because
technological change eliminates your job. Note that Hayek’s list of
accessible social services is actually quite broad. And in other parts of the
Road to Serfdom, he recognizes the need for government to address externalities,
monopolies, etc.

I dislike efforts to color Hayek as a one-dimensional personality as much as
I am irritated by efforts from the right to discredit Keynes as a socialist. Of
course, some blame for the attack on Hayek should be directed to the right; so
called supporters of Hayek have damaged his reputation with such simplistic
expositions as this cartoon.

Speaking of Keynes, Robert Skidelsky’s masterful biography includes Keynes’s
thoughts on Hayek:

Keynes’s response was unexpected. Hayek’s was a “grand book,” he wrote, and
“we all have the greatest reason to be grateful to you for saying so well what
needs so much to be said….Morally and philosophically I find myself in agreement
with virtually the whole of it; and not only in agreement, but in deeply moved
agreement.”

Keynes did note, however, that Hayek, by admitting to the need for government
to serve a social function, recognized that there was in fact need for a middle
ground, but could not determine where to draw it.

Finally, it is important to recognize that Hayek was writing in reaction to
the rise of Fascism in Germany and Stalinism in the Soviet Union. There is an
important lesson there, and God help us if we ignore it in an eagerness to
discredit Hayek.

The Economists Blog makes an important point (via Jim Henley) about Hayek that I've observed elsewhere, namely, that Hayek absolutely did not oppose all government-provided "safety net" programs. Quoting from The Road to Serfdom:
[Read More]

Tracked on Wednesday, December 27, 2006 at 05:36 AM

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Tim Duy: In Defense of Hayek

Tim Duy comes to the defense of Hayek:

In Defense of Hayek, by Tim Duy: I feel a need to at least quickly defend Hayek against
Jeffery Sachs attacks. Sachs leaves the impression that Hayek is a right
wing ideologue who argues against any state provision of social services. From
the Road to Serfdom:

There is no reason why in a society which has reached the general level of
wealth which ours has attained the first kind of security should not be
guaranteed to all without endangering general freedom…there can be no doubt that
some minimum of food, shelter, and clothing, sufficient to preserve health and
the capacity to work, can be assured to everybody…Nor is there any reason why
the state should not assist the individuals in providing for those common
hazards of life against which, because of their uncertainty, few individuals can
make adequate provision. Where, as in the case of sickness and accident, neither
the desire to avoid such calamities nor the efforts to overcome their
consequences are as a rule weakened by the provision of the assistance – where,
in short, we deal with genuinely insurable risks – the case for the state’s
helping to organize a comprehensive system of social insurance is very
strong….To the same category belongs also the increase of security through the
state’s rendering assistance to the victims of such “acts of God” as earthquakes
and floods. Whenever communal action can mitigate disasters against which the
individual can neither attempt to guard himself or make provision for the
consequences, such communal action should undoubtedly be taken….There is,
finally, the supremely important problem of combating general fluctuations of
economic activity and the recurrent waves of large-scale unemployment which
accompany them…

The type of planning that Hayek was vociferously opposed to is that meant to
offset not insurable risk, but the fundamental shifts that accompany structural
change:

The planning for security which has such an insidious effect on liberty is
that for security of a different kind. It is planning designed to protect
individuals or groups against diminutions of their income, which although in no
way deserved yet in competitive society occur daily, against losses imposing
severe hardships having no moral justification yet inseparable from the
competitive system.

In other words, it is appropriate for society to guarantee a proscribed level
of health care accessibility, but not to guarantee you against loss because
technological change eliminates your job. Note that Hayek’s list of
accessible social services is actually quite broad. And in other parts of the
Road to Serfdom, he recognizes the need for government to address externalities,
monopolies, etc.

I dislike efforts to color Hayek as a one-dimensional personality as much as
I am irritated by efforts from the right to discredit Keynes as a socialist. Of
course, some blame for the attack on Hayek should be directed to the right; so
called supporters of Hayek have damaged his reputation with such simplistic
expositions as this cartoon.

Speaking of Keynes, Robert Skidelsky’s masterful biography includes Keynes’s
thoughts on Hayek:

Keynes’s response was unexpected. Hayek’s was a “grand book,” he wrote, and
“we all have the greatest reason to be grateful to you for saying so well what
needs so much to be said….Morally and philosophically I find myself in agreement
with virtually the whole of it; and not only in agreement, but in deeply moved
agreement.”

Keynes did note, however, that Hayek, by admitting to the need for government
to serve a social function, recognized that there was in fact need for a middle
ground, but could not determine where to draw it.

Finally, it is important to recognize that Hayek was writing in reaction to
the rise of Fascism in Germany and Stalinism in the Soviet Union. There is an
important lesson there, and God help us if we ignore it in an eagerness to
discredit Hayek.